Canadian Mortgage Interest Rates, Going Up or Down?

It appears as though there is constant speculation as to whether Canadian interest rates will go up or down. Interest rates have been low for so long and many consumers have been taking advantage of low interest variable rate mortgages.

Canadian interest rates were originally reduced to historic lows after the attacks on the World Trade Centre in 2001. Into the mid 2000’s, the Bank of Canada began to inch interest rates upwards, but the recession that began in 2008 forced the Bank of Canada to bring the national lending rate back down.

They have remained low for the past 3 years, however in the past the Bank of Canada has raised interest rates 3 times.

When the Bank of Canada begins inching up interest rates, those who have variable rate mortgages begin to question whether or not it might be time to lock in.

A variable rate mortgage is one that floats with prime. If interest rates go up, so will the interest rate on a variable rate mortgage and in accordance so will the monthly mortgage payments. Many folks who have low interest variable rate mortgages will closely monitor the Bank of Canada’s announcements. This is because many variable rate mortgage products carry an option to lock-in.

This is one reason why we often write about the topic of whether or not Canadian interest rates will stay low or go up.

If you want to determine whether or not interest rates may go up, rather than paying attention to the Bank of Canada, pay attention to the strength of the Canadian dollar. A large part of Canada’s economy and Ontario’s economy is tied to the manufacturing sector. We export a lot of products. However, when our dollar is strong it makes it more expensive for other countries to trade with us.

Compared to the currency from other countries we currently have a strong Canadian dollar, and this is due to Canada’s strong bank system. Economic instability in countries around the world will only continue to strengthen our dollar. While Standard and Poor’s recently announced that it was downgrading the U.S.’s world credit score from AAA to AA, it has been announced that Canada will continue to maintain its AAA world credit score status. This is yet another indicator that our dollar will continue to soar.

Unfortunately this also means that we could lose a lot of jobs in the Canadian and Ontario manufacturing sectors. This reason alone may be one reason that the Bank of Canada decides to leave interest rates where they are (as they did in their most recent interest rate announcements) or even lower it. There are other economic indicators that the Canadian mortgage interest rates will continue to stay low, therefore now is a better time than ever to take advantage of a low interest variable rate mortgage.